Does the time period to sue for deficient design, planning, surveying, supervision or construction of an improvement to real estate in New Jersey run from the substantial completion of a phase or component of a construction project or from completion of the entire project? This question was answered in State of New Jersey v. Perini Corporation, 425 N.J. Super. 62 (N.J. Super. Ct. App. Div. 2012).
In that case, the centralized underground system that distributed hot water through South Woods State Prison began to fail in 2000. The State of New Jersey claimed that the defects of the pipes were so serious that the entire system needed to be replaced. If not replaced, the prison would have to be shut down and all prisoners would have to be relocated. Plaintiff claimed the defects were a direct result of construction defects, product failure and design deficiencies. The state filed suit against companies that were responsible for the construction, materials and design of the system three days short of ten years from the date the certificates of substantial completion on the prison construction project were issued by the State.
The defendants argued that the claims were brought outside of the ten year limitation of the New Jersey Statute of Repose, N.J.S.A. 2A:14-1.1, which states:
No action, whether in contract, in tort, or otherwise, to recover damages for any deficiency in the design, planning, surveying, supervision or construction of an improvement to real property,…nor any action for contribution or indemnity for damages sustained on account of such injury, shall be brought against any person performing or furnishing the design, planning, surveying, supervision of construction or construction of such improvement to real property, more than 10 years after the performance or furnishing of such services and construction…
Plaintiff responded that the period should commence at a later point, namely when the certificates of substantial completion of the prison construction project were issued.
The court first noted that there was substantial precedent for the principle that the “ten-year statutory period runs from substantial completion of a component of a multi-phase construction project, not the completion of the project as a whole” Welch v. Engineers, Inc., 202 N.J. Super. 387 (App. Div. 1985). However, the court also recognized that the above principles would not necessarily apply to multi-phase projects. The determination would hinge on the meaning of the phrase, “improvement to real property” found in the Statute of Repose.
The Court found that:
The hot water system was not separately “an improvement to real property” within the meaning of N.J.S.A. 2A:14-1.1a. It was a component of an improvement, similar to the steel framing of a building, its roof, any mechanical or electrical system, or other components of a construction project
The Court noted that multiple phases of a construction project that are properly documented as separate projects in and of themselves can prompt separate periods of repose. In this case, however, the hot water system was not documented in that manner. Therefore, the statute of repose did not separately run from the point of completion of the hot water system.